For federal income tax purposes, legal fees are no longer deductible. The Tax Cut and Jobs Act of 2018, disallowed miscellaneous itemized deductions for the period 2018-2025. That includes personal legal fees, including legal fees incurred in the production of taxable income. i.e. Social Security, Social Security Disability, VA Disability.
However, you may include them and TurboTax will transfer the amount as a deduction on your state income tax return, if your state allows it.
To enter:
- Sign into your TurboTax account.
- Select Pick up where I left off or Continue.
- Select Federal then Deductions & Credits from the left side menu.
- On the Your tax breaks screen, scroll down to Other Deductions and Credits.
- At Legal Fees, select Start/Revisit. If you don't see legal fees, click on the down arrow to expand.
- On the Legal fees won't affect your returns screen, select Enter my expenses.
- Continue with the onscreen interview until complete.
Here is a short cut you may use:
- Type legal expenses, deduction in the search or find box, click search.
- Click on Jump to legal expenses, deduction.
In general, only legal fees that are related to your business, including rental properties, can be deductions. This is true even if you didn't win the legal case in which the legal fees were incurred.
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